Popularized by movies such as "A Beautiful Mind," game theory is the mathematical modeling of strategic interaction among rational (and irrational) agents. Beyond what we call `games' in common language, such as chess, poker, soccer, etc., it includes the modeling of conflict among nations, political campaigns, competition among firms, and trading behavior in markets such as the NYSE. How could you begin to model keyword auctions, and peer to peer file-sharing networks, without accounting for the incentives of the people using them? The course will provide the basics: representing games and strategies, the extensive form (which computer scientists call game trees), Bayesian games (modeling things like auctions), repeated and stochastic games, and more. We'll include a variety of examples including classic games and a few applications.
You can find a full syllabus and description of the course here: http://web.stanford.edu/~jacksonm/GTOC-Syllabus.html
There is also an advanced follow-up course to this one, for people already familiar with game theory: https://www.coursera.org/learn/gametheory2/
You can find an introductory video here: http://web.stanford.edu/~jacksonm/Intro_Networks.mp4

講師

Matthew O. Jackson

Professor

Kevin Leyton-Brown

Professor

Yoav Shoham

Professor

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All right, folks it's Matt again. So we've been looking at nash equilibrium and understanding play and, and setting where we make those kind of predictions. and we've also been looking a little bit at dominance relations and, and now lets talk about strictly dominated strategies and, and removal of those. Which is another way to analyze a game. So when you're talking about game theory, there's many different ways that people can think about analyzing games in terms of stability, in terms of predicting. What people are going to do, what logic can be applied and, this is, is, is another important way of looking at games and may give us some insights. So the idea of, when we start thinking about rationality in game theory, the basic premise here has been, that players maximize their payoffs. So they're basically trying to maximize their payoffs. And again it doesn't necessarily mean that they're just greedy. Payoffs could be that they, you know, that they are altruistic. Public minded etcetera. But the, the, the premise here is that there's something, some objective function that people have, and they tend do things that'll give them higher pay offs rather than lower pay offs. Okay. So in terms of iteration on this logic, what we're going to be thinking about is what if all players know that others maximize their pay offs, and we have an idea of, of what the structure of the game is. Then what does that mean for the game? Can, can we make, deduce something about what should be played in the game? And what if all players know that all players know that, that players are rational in this sense? so you can, you know, take this what if I know that you know that I know, and, and so forth. You can take this ad, ad absurbum but it's an important concept in, in understanding what it. Yields give us some insight into games and gives us some predictability. now, you know? Going through very, very high levels of this are, are questionable. But nonetheless, the logic here and, the predictions that are made will give us some understanding of games that we can use, in analyzing equilibrium and doing other things with it. So, you know, we can take this, logic, fully to a, to its full logic. [INAUDIBLE] conclusion. Okay, so in terms of strictly dominated strategies. That means a strategy which, which is, Al-, there's some other strategy which always does better than it. it can never be a best reply. So, so we'll make that clear in a second. so, basically, that means, that, that if this is a strategy that, that never does well. There's something which does always better than this. Against any strategy, of, of the other players. Then basically it's never going to be played. So this, this is essentially a strategy we can just, safely ignore if we think players are rational. They should never play a strictly dominated strategy. there's something else which does better in all circumstances for them. So, we remove those from the game. And the idea of iteration is we take those out, now we've got a simpler game. Now let's do the same thing, right? So there might be something which is now strictly dominated in this thing. So, a player should never player this once we get to this reduced game. And, then we take those out and we get an even further reduced game and so forth. And we just keep iterating on that that. It leaves us with some prediction and then we think that the only thing that's logical if there's rational players and they understand that other Players are rational and so forth. They're going to be left inside that sub par game. Okay, so, the running this process to its termination is called the iterated, iterated removal of strictly dominated strategies. So in terms of formal notation what, what are we seeing here? A strategy A sub I for some player I is strictly dominated by some other strategy of the same player, A prime I if if what's true. The, the pay off that the person gets. From playing ai, the one that is strictly dominated is worse strictly lower, 'kay? And it's important that this is as strict in equality than the pay off that they would get by playing a prime, no matter what the other players do. So, this is a for all sign for every possible strategy of the other players. No matter what they do. This one, ai is worse than the payoff for ai prime. OK? So, no, there's no circumstance in which you can do as well. It always does strictly worse. That means it's a, it's a strategy where you're just strictly better off playing a prime i. That's the concept of strict [INAUDIBLE]. Okay, so let's have a, a, an idea now of iterative, iterated removal of strictly dominated strategies. So, here's a game, a three by three game. it's got a bunch of different payoffs in it. We look at it. We begin to think, okay let's, suppose you want to find the, the Nash equilibrium. [UNKNOWN] of this game, well it, it gets a little complicated because you have to, you, if you're thinking about mixed strategies or pure, and you, you have to consider all the possible combinations. One thing we can begin to do is look for strictly dominated strategies, and just get rid of those. So for instance in this game, what's true, if we look at this game, we notice that R is strictly dominated by C. Right. So the, the column player gets a strictly lower payoff in every one of these entries than they get in every one of these entries. So you would be strictly better playing C than R no matter what the other player does. Whether the other player goes up, middle or down. Center always does better than, than R or even if the other player mixed. So, whatever the other player does, you get a strictly higher pay off from the center than R so we should just get rid of R altogether. And now we have a simpler game. Right? So the idea is boom, we get rid of R altogether and now we've got a simpler game. Okay, so let's iterate on that logic. So now, there's no domina-, strict domination, any longer. Between, for the, for the column player. Because the column player's actually indifferent between left and center if the other player plays middle. But one thing we do notice here, is that the middle strategy. Of the, role-player is now dominated, right? So, the middle strategy does strictly worse than the up strategy for the role-player, right? So, 3 is better than 1, 2 is better than 1. No matter what happens, you're better off playing up than middle. So M is strictly dominated by U. In this case we can get rid of M together. That collapsed the game further. So now we're iterating, we've got a simpler game. Now, we see that, in this case now and once we've done this removal, now C is dominated by L, right? So, the column player would always get better playing L in this game, than Sorry, would always be better off playing C than L in this game.So this, the payoff is always higher playing C than playing L. So, L is strictly dominated by C, we can get rid of L. Simplify the game further. You can see where this is going. Boom, we're down to a very simple game, now the, if this is the game that's left the row player is better off playing down than up. Boom, so what do we end up with. We end up with, down and center being the only things that are left once we've done this full iteration. So we started with a fairly complicated game We end up making a very simple prediction that the only thing that is left after iteratively eliminating strictly dominated strategies, is down for the role player, center for the column player that leads to a pay off of 4 and 2 for the 2 players, okay. So in fact. Giving that a player, if we're looking for a nash equilibrium, there things have to be best replies we know they could never be playing a strictly dominated strategies. So we can rule those out. They can't actually be playing. You can convince yourself they can't be playing something that's strictly dominated and what's remaining and so forth. So, the fact that we ended up with a unique prediction here. actually tells us that this game has a unique Nash equilibrium and the only Nash equilibrium is for players to play down and center, So, it actually, in this case identifies a unique predicted play which coincides with the only Nash equilibrium of this game. Okay, so we've got the unique Nash equilibrium d c so that, that worked very well in that game. Let's take a look at another game. I would slightly change the payoffs of this matrix. Let's try again. in this case you know r is still dominated so in this case r always leads to 0 for the column player center, left or center give higher payoffs. So, in this case r is dominated by either l or c. We can get rid of r and then we, we can go through again. Now, in this particular situation, there's something that's interesting. So, now the, the column players in different between the two. But when we looking at the row player, we notice that the row player. doesn't have any pure strategy domination relationships. So, you know, the, the player gets 3 here, 4 here, compared to 0 0, so neither of these strictly dominate the other. they get 1 always by playing middle so, in this case they sometimes do better than down If they're playing middle sometimes do better than up if they're playing middle, so there's not strict domination when we're looking just at pure strategies. but if players are willing to randomize, one thing to notice in this game is that let's suppose that you played 1/2 on up and 1/2 on down. What would your expected payoff be? So if the other player went left and you're playing half, up half down, you get a path of 1.5. If you were doing this and the other player was playing C, you would get a half of 0 and a half of 4, you would get 2. So there is, when we look at playing a half, half then What would we end up with if we allow for that mixture. Right? We put in a mixture. We would end up having oops. How'd that happen. we would end up with 1.51 and a 2, 1. So, we end up here. With something which strictly dominates middle. So playing a half on up and a half on down gives the role player a strictly higher pay off than they would get by playing middle. So in this case M is dominated by the mixed strategy that selects U and D with equal probability. So in this case we can still get rid of M. so in net, we're, we're down to a reduced game. now this game doesn't really reduce any further, the column players indifferent, the role player likes a better [INAUDIBLE]. Column player goes left, it likes down better, if the column player goes right so what's going to happen in this game now you'd have to take, further analysis. And actually if you want to go through and solve for the nash equilibria this game, there's a lot of them, right. So there's in fact an infinite number of nash equilibria, given that the, column player's fully indifferent in this game. So you can go through and analyze all the [UNKNOWN] if you want. But the iterative elimination of strictly dominated strategy still gave us a lot of predictive power in the sense that it collapsed the game down to a much simpler game and then it's much easier to analyze what's left. ok, so, iterative, removal of strictly dominated strategies. one nice thing about this is it preserves Nash equilibria. So, you can use it if, even if you're just wanting to, to analyze Nash equilibria. You can use it as sort of a preprocessing step, right? So before you try and compute Nash Equilibria, get rid of all the strictly dominated strategies, and iterate on that. Some games like the first one we looked at tend to be solvable with this technique. That's called dominant solvability. If it, if it actually collapses to a single point, you were able to solve that game just by using dominance arguments. some games won't be, but it still could be useful to, to, to analyze these things. what about the order of, removal? So, you know, I, we, we did things in a very particular order, so just noticing that the, the calm player had one, you know, the, the, the, right play was, was strictly dominated and so forth. What if we started with the, with a, a different player, or, would it would it make a difference? if we're dealing with strictly dominated strategies, then order doesn't matter. So no matter how you do this, whatever order you do it in, you'll end up with the same solution. you can spend some time trying to convince yourself of that. Think carefully about it, So that's something that can, you'd have to prove. but in, in fact order does not matter in eliminating strictly dominated strategies. So the logic is, is very tight in that respect. there's another type of domination which also makes some intuitive sense and people use in games. And that's to weaken the domination relationship and instead of, of strict domination we can consider weekly dominated strategies. What's the idea of weekly domination? it's very similar to what we had before. But instead of having the strict inequality hold everywhere, right? So instead of having this hold for all A minus I, it just has to hold some, sometimes, and you just need to weaken equality for all strategies of the others. So the idea of a, of a weekly dominated strategy. Is that it always does A prime always does at least as well as A and sometime strictly better. So you, this is still a strategy, you could say, okay A prime's really a [INAUDIBLE] Dominates a because it always does at least well, and sometimes strictly as well so if I'm uncertain at all, I might as well go with the one which always does as well and sometimes does strictly better. So weekly dominated strategies can be eliminated as well. You can go through, you can iterate, you know, just go through games exactly like we did before, same kind of thing. but, one thing that's true about weekly dominated strategies, is that sometimes they could be best replies, right, so, a strategy could be weekly dominated, and still turn out to be a best reply. Reply how could that happen let's suppose for instance we look at a very simple game where the role player can go up or down. If they go up they get a path of one against left and right of the column player and you know here they get two here they get three. So, this would be a situation where down weekly dominates up, right, you always get this high a payoff, and sometimes strictly higher. but none the less, it could be for instance that if left is the is, is the strategy that's actually chosen by the calm player Then upper still best reply, right. So for instance, if we put in payoffs here of, of 1 1, so the column player is exactly indifferent between these, these 2 strategies.Then this is actually a Nash Equilibrium. And so eliminating that, actually eliminates one of the Nash equilibri of the game, right? So depending on what those pay offs are, we could end up eliminating the Nash equilibrium of the game. And you know so this is, is a situation where you know, the...uh, we end up eliminating something which could be part of the equilibrium what is true is at least 1 equilibrium is always preserved. what's unfortunate is that the order of removal can matter. So which order you remove things in can begin to, to matter. there are some games which is useful to using, so for instance if you remember the Keynes Beauty contest game that we talked about earlier where people were naming injured between zero and a hundred think about trying to solve that iterative elimination of Weekly Dominated Strategies. What do you end up with so it can still be a useful logic and that logic can help you in analyzing some games but you do have to it is not as tight as [UNKNOWN] domination because there are situations where you might want to play a weekly dominated strategy. If you are sure, that the other player, was, was going to, you know, go in a certain direction. So for instance here if we put in two, one then then if we eliminate the column players dominated strat, weekly dominated strategy first, right, so they. Left weekly dominates right, we get rid of right, then what are we left with, we're left with a situation where the column then, I'm sorry the row player is indifferent between the 2 strategies right, so if we, sort of say okay look, this left dominates right so we get rid of this. Then we end up with a situation where up and left is still left. But if we removed, the row player's things first, we would remove, up first, and then, we would end up with down left. So, so, depending on, on how you go through this. You get different, different things that are left. so there are, are things that, you know, where the order matters and that's somewhat problematic. Okay, iterative strict and rationality, players maximize their payoffs. They don't play strictly dominated strategies, they don't play strictly dominated strategies given what remains. we iterate on that, nash equilibria Our subset of what remains, so it's a nice, simple solution concept that helps us, us throw things out of the game and simplify what we're looking at. We can also ask whether or not we see such behavior in reality. Do people really act in ways that are consistent with eliminating strictly dominated strategies and more over iterating on that process.